The New Jersey Supreme Court has approved the practice of a company retaining counsel to represent its employees who may be witnesses or targets in a grand jury investigation. In Matter of the State Grand Jury Investigation, 200 N.J. 481 (2009), the court put its unanimous imprimatur on a practice that has been common in New Jersey and other states, but set forth some strict preconditions for such arrangements, which would apply equally in the civil context.

Under the Rules of Professional Conduct (in New Jersey and in most other jurisdictions) a lawyer may not accept compensation from one other than the client unless three conditions exist: (1) the client must have given his or her informed consent; (2) there can be no interference with the lawyer’s independence or professional judgment, or with the attorney-client relationship; and (3) information relating to the representation of the client must be protected.

In order to ensure that these ethical requirements were met when a company retains counsel for its employees, the court insisted on further strictures, including:

  • No current attorney-client relationship between the company and the attorney it retains for its employee;
  • The lawyer may not communicate with the company concerning the substance of the representation (and all bills to the company must be redacted to eliminate such information);
  • The company must pay the attorney’s invoices within the regular course of its business in the same manner that it pays its own attorneys; and
  • The company shall not be relieved of its obligation to continue to pay the lawyer without leave of court.

The court also expressed distaste for an arrangement in which the company offers a preselected roster of lawyers to represent the employee but allows the employee the option to pay for a different lawyer. The court permitted the arrangement in the case before it, but only because each of the employees had certified that they were satisfied with their assigned attorneys. The court warned that, “in the future, no such limitations on the choice of counsel should be communicated or imposed on the employee/client save for reasonable limitations on fees and expenses.”

In the event you are considering retaining counsel for your employees who may be witnesses in a civil or criminal proceeding, you must pay careful attention to this decision or risk serious consequences, including sanctions and the loss of the attorney-client protection over key communications.